We know that foreign exchange is one of the biggest markets in the world. Did you know that this market is divided into three distinct categories? The main categories include Europe, North American, and Asian sessions. As a trader, you will learn that the European and North American sessions are much easier to trade in compared to their Asian counterparts. Why is this? The Asian session is not as fast-paced, and as a result, FX trading becomes quite tough. However, you can work around this by trading the popular currency pairs in the region. Let’s look at which currency pairs are increasing in importance in the Asian forex market.
How to choose the best pair?
We’ve noticed that many professional and even novice traders shy away from the Asian market. A large part of this is due to low volume, high spreads, and high fluctuation. But this is precisely what you can make work for you. If you know exactly how to trade, this market can be of great benefit. And understanding currency pairs, choosing them correctly, and understanding which pairs are trending will help you here. Since most European and North American sessions close at night, you can avoid USD, EUR, and GBP pairs. This is because there will be little to no liquidity after trading hours.
Finding the best pair to trade with does not have to be difficult. For starters, we can use the Japanese yen as a great currency to trade with. You can also look at other strong currencies, but the yen is the currency used the most. Remember that your strategy will affect the currency pair you choose. Let’s look at the currency pairs making waves in the Asian market.
NZD/JPY
While this currency pair is relatively new, it does offer high volatility and liquidity – NZD/JPY is listed in the top 10 most volatile currency pairs. This currency pair involves the New Zealand dollar and the Japanese yen. We know that the yen is highly popular amongst traders and is one of the biggest currencies in the world. On the other hand, while NZD is not nearly as popular as the yen, the currency is fast climbing the ranks due to New Zealand’s stable economy. This currency pair is gaining momentum and earning popularity. So how to make the most out of this pair? Therein lies the time you trade. Liquidity is affected during the busy times of trading. This is exactly where you need to capitalize.
AUD/JPY
If you want to diversify your portfolio, this currency pair is for you. While the AUD/JPY pair has been around for some time, you can significantly benefit from it. Here’s how. The biggest thing to consider here is the timing and when you trade. The Tokyo session is an excellent choice because it offers high liquidity. This pair is also highly volatile, and you need to be strategic when finding periods with high volatility.
EUR/JPY
We know that we previously said that when European and North American markets close for the day, there is little to no liquidity. However, the EUR/JPY is one of the most popular currency pairs. And must always be considered. So why should those trading in the Asian region trade with this pair? Well, it’s because it’s one of the most popular currency pairs in the world. It contributes 3% of the global daily transactions. Traders also prefer this pair due to its levels of volatility. And it supplies so much more trading opportunities.
JPY/USD
There is no denying the popularity of the USD. It’s traded with nearly all other currencies and is arguably the most popular currency in the world. But there are a few factors to consider since a range of things can influence these global powerhouse currencies’ prices. Both the US and Japanese economies are strong; however, this does not mean you should throw caution to the wind. Since the JPY/USD has one of the highest volumes, you need to be strategic in your trades.
Advantages of trading in Asia
The Asian forex market is fast gaining momentum, and this is wonderful. There are a few key advantages when trading in this market. They include:
- Low liquidity levels
- Low volatility
- Visible exit and entry points
- Great for risk management
- Breakout opportunities come through at the end
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